How can your credit score help you get a mortgage?

Many people forget about managing their credit history when planning for a mortgage, often making saving for a deposit their main priority and underestimating the critical role that credit scores have in their journey to home-ownership.

Here we explain what a credit score means for your mortgage application so when the time comes, you have the best possible chance of being approved.

Let’s start with your credit history

If you’ve got the deposit, found the right house and mortgage deal but your credit score isn’t up to scratch, you may be disappointed when you come to make a mortgage application.

Your lender will look at many things when deciding whether you’re suitable for a mortgage and your credit score is one of them.

How you have borrowed and repaid your debts in the past is a reflection of your financial health and ability to borrow money responsibly. Your credit history, which appears on your Noddle credit report, details all your repayments in the last six years, whether they were late or on time. Any history of late payments will raise a red flag with your lender who will question your ability to make your mortgage repayments.

Keeping a good credit history is about making all your credit repayments in full and on time, not just paying the minimum as this can hurt your credit score.

Now for your credit score

Your credit history has an impact on your credit score, which is an overall rating of your financial health based on a number of other factors, such as electoral roll data, credit searches and available credit. Lenders will look at your credit score, however they will also have their own scoring model specifically for their industry.

What credit score is needed for a mortgage?

The short answer is there is no perfect credit score or minimum score that is more likely to get you accepted for a mortgage. In general, the higher the credit score the better. You’ll also be in a better position to get a good interest rate on your mortgage if you have a favourable credit score.

Improving your credit score

By improving your credit score well in advance of applying for a mortgage, you can increase your chances of being approved and getting a cheaper rate. Here are some tips on how to go about getting a better score:

  • Ensure you’re registered on the electoral roll
  • Pay all your debts in full and on time
  • Make sure all the information contained in your credit report is correct
  • Space out credit applications
  • Build up a good credit history
  • Protect your identity

It’s not all about the score

Don’t be wedded to the idea that getting a mortgage all rests on those three little digits. Your credit score is just one aspect of a lender’s criteria and each lender will have a different criteria on which they will assess you on, so you might be accepted by one lender and not by another. Other factors lenders may look at are:

  • Your income
  • Employment status
  • Amount of deposit saved
  • Size of the loan you want
  • Existing debts

Aim to maintain good financial health all round and you’ll be more likely to be accepted for the home you want.

Don’t let the moment you apply for a mortgage be the first time you look at your credit score; leaving it as an afterthought could be detrimental. You need to be aware of your score long before the application process so you have time to sort out any problems and improve your score. It’s much easier to maintain a good score or fix a bad borrowing history over time than it is doing it last minute. If mistakes are spotted, a lender may have to be contacted in order to resolve a query. This delay may not be ideal if a house purchase or mortgage application is pending.

Remember, a good credit report and score is not only important for a mortgage – they help you in other parts of your life too, such as taking out a loan, applying for a mobile phone contract and even renting a flat.

Check your free for life Noddle credit and score here